What is the purpose of the liquidated damages payment required of a Burneys Sweets More franchisee?
Burneys_Sweets_More Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisor terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 17(f)), then within 10 days thereafter Franchisee shall pay to Franchisor a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average monthly Royalty Fees and Brand Fund contributions that Franchisee owed to Franchisor under this Agreement for the 52-week period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 104 or (2) the number of weeks remaining in the then-current term of this Agreement.
If Franchisee had not operated the Business for at least 52 weeks, then (x) will equal the average Royalty Fees and Brand Fund contributions that Franchisee owed to Franchisor during the period that Franchisee operated the Business.
The "average Royalty Fees and Brand Fund contributions that Franchisee owed to Franchisor" shall not be discounted or adjusted due to any deferred or reduced Royalty Fees and Brand Fund contributions set forth in an addendum to this Agreement, unless this Section 18(r) is specifically amended in such addendum.
Franchisee acknowledges that a precise calculation of the full extent of Franchisor's damages under these circumstances is difficult to determine and the method of calculation of such damages
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Burneys Sweets More Franchise Disclosure Document, the liquidated damages payment is designed to compensate Burneys Sweets More if the Franchise Agreement is terminated due to the franchisee's default, or if the franchisee attempts to terminate the agreement without proper authorization. This payment is not considered a penalty but rather a means to address the financial losses Burneys Sweets More incurs due to the early termination.
The liquidated damages are calculated as follows: the average monthly Royalty Fees and Brand Fund contributions that the franchisee owed for the 52-week period before ceasing operations, multiplied by either 104 or the number of weeks remaining in the franchise term, whichever is less. If the franchisee operated for less than 52 weeks, the calculation uses the average Royalty Fees and Brand Fund contributions owed during the actual period of operation. These average Royalty Fees and Brand Fund contributions are not discounted or adjusted, even if the franchisee had deferred or reduced payments, unless specifically amended in an addendum to the Franchise Agreement.
This clause ensures that Burneys Sweets More receives compensation for the anticipated revenue they would have earned over the remaining term of the agreement. It acknowledges that precisely calculating the full extent of damages is difficult, and the formula provides a predetermined method for assessing these damages. For a prospective franchisee, this means understanding that terminating the agreement early or defaulting on obligations can result in a significant financial liability to Burneys Sweets More, based on the established calculation method.